Since President Trump took office, the US Department of Justice (DOJ) has taken repeated steps to restrict federal attorneys from negotiating settlements in which defendants agree to conduct “supplemental environmental projects (SEPs)” in exchange for reduced formal penalties for the noncompliance that led to the agency investigation and enforcement. Proponents see SEPs as a way to promote environmental and health values by encouraging defendants to undertake projects that wouldn’t occur otherwise in order to reduce or eliminate civil and/or criminal liability. Opponents see them as rogue efforts in which prosecutors substitute their own judgment for the statutory and regulatory directives that are supposed to guide their actions.
Because DOJ acts as federal agencies’ attorneys in federal enforcement actions, which involve criminal and/or civil claims, this approach affects prosecutions by the US Environmental Protection Agency (EPA) and other federal agencies. Former Attorney General (AG) Jeff Sessions took one step in a June 2017 DOJ management memorandum directing US attorneys NOT to agree to SEPs that include payments to third parties (I wrote about that memo here).
Now, a new DOJ memorandum from AG William Barr rejects arguments that the “America’s Water Infrastructure Act of 2018” supports the use of SEPs in cases against state and local governments, as part of the 2018 enactments' expansion of such agencies’ flexibility to integrate their stormwater management activities under the Clean Water Act (CWA).
What’s a SEP?
Each agency has its own working definition for SEP, often recorded in formal enforcement policies. For example, EPA policy distills the following three criteria:
Project must be “environmentally beneficial”
Must be undertaken as part of a settlement to an enforcement action
Must not otherwise be legally required by the settling party
EPA requires that SEPs be sufficiently related to the violation being prosecuted (“nexus”), and must not be inconsistent with the thrust of the law involved (CWA, Clean Air Act, etc.). (I discussed EPA’s policy in more detail in the blog linked above).
What is DOJ’s Approach to Settlements With State and Local Governments?
AG Barr’s memoranda emphasize that states are sovereign entities with roles that should be protected – even when considering settlements of those sovereigns’ wrongdoings. Accordingly, the memo directed that consent decrees “must not be used to achieve general policy goals or to extract greater or different relief from the defendant than could be obtained through agency enforcement authority or by litigating the matter to judgment.”
Both memoranda emphasize that the defendant-sovereign should be given every opportunity to respond to allegations, and to prepare and present explanations and defenses. If settlements are to be entered, they should avoid conditions that would interfere with the defendant agency’s subsequent autonomy, such as extensive oversight or monitoring, or long -term compliance commitments. In particular, long-term commitments are seen as infringements on the ability of subsequent elected leaders (mayors and governors, and state and local legislators) to exercise their own authorities. Accordingly, the 2018 memo requires federal attorneys to inform higher officials (the Deputy AG (essentially the DOJ COO) or Associate AG (overseeing enforcement)) for review and approval before commencing negotiations that would lead to these disfavored outcomes. Similarly, review and approval by one of these officials is required before entering into a settlement imposing these disfavored outcomes.
The latest memo also addresses – and rejects – arguments that SEPs should be excluded from the restrictive policies set forth in the 2018 memo. Instead, the new memo notes that:
Penalties assessed after completed enforcement actions or settlements are usually deposited with the federal government, so reductions in penalties as part of SEP agreements reduce federal funds and impinge on the Congressional “power of the purse”;
SEPs have been controversial for decades, with periodic attempts to limit their scopes to retain the “nexus” with the alleged legal violations, and to protect the public purse from diversions of potential penalties into other activities favored by the litigants;
2018 amendments to CWA that encourage local governments’ use of integrated planning to reduce CWA compliance costs referenced plans developed in conformity with EPA policy guidance from 2012, but do not necessarily incorporate an element of that policy stating that such plans could be incorporated into settlements of CWA enforcement actions and therefore do not justify categorical exception of SEPS from the restrictive DOJ policies described above.
Accordingly, the 2019 memo reiterates that use of SEPs in settlements are fully subject to the restrictive policies prescribed in the earlier AG memoranda.
The new AG memo is intended to ensure that SEPs are subject to high level scrutiny, and will only pass muster when they are narrowly drawn to match the specific offenses under enforcement. I can’t predict whether this produces more settlements that emphasize penalties, or leads to longer enforcement cases as defendants fight charges rather than settle.
Readers should note that US federal environmental health and safety laws are subject to delegation to states for administration and enforcement, and that most states have secured delegation for at least some of these laws. In those states, EPA (or the Occupational Safety and Health Administration or other federal agency) retains the authority to intervene in a state’s attempts to enforce delegated federal authority. It’s therefore possible that the overlying federal agency could intervene in a state action, to argue against a SEP or other settlement condition.
Is the organization subject to formal enforcement action by a federal agency, involving environmental violations, and in which the agency is represented by the US DOJ?
Is the organization subject to formal enforcement action by a state agency, involving environmental violations?
If so, has the organization entered into settlement discussions with the prosecuting agency and its attorneys?
Where Do I Go For More Information?
Department of Justice AG memoranda:
EPA SEP webpage
California Environmental Protection Agency (CalEPA) SEP webpage
Specialty Technical Publishers (STP) provides a variety of single-law and multi-law services, intended to facilitate clients’ understanding of and compliance with requirements.
About the Author
Jon Elliott is President of Touchstone Environmental and has been a major contributor to STP’s product range for over 30 years.
Mr. Elliott has a diverse educational background. In addition to his Juris Doctor (University of California, Boalt Hall School of Law, 1981), he holds a Master of Public Policy (Goldman School of Public Policy [GSPP], UC Berkeley, 1980), and a Bachelor of Science in Mechanical Engineering (Princeton University, 1977).
Mr. Elliott is active in professional and community organizations. In addition, he is a past chairman of the Board of Directors of the GSPP Alumni Association, and past member of the Executive Committee of the State Bar of California's Environmental Law Section (including past chair of its Legislative Committee).
You may contact Mr. Elliott directly at: email@example.com